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Volume 23 No. 17
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Steve Ballmer’s bomb for local TV

Aims to keep digital rights for OTT offering

If Los Angeles Clippers owner Steve Ballmer has his way, local NBA media deals never will be the same again.

In a move that will upend the traditional cable rights package, the tech-savvy billionaire has told TV networks that he will hold back most of the traditional digital rights in his next media deal so that the team can launch a second-screen over-the-top service to supplement its games. These rights will not include live games but will allow for other in-game programming, such as player-specific cameras, in-game highlights and real-time statistics — though no specific content has yet been determined.

Los Angeles: A market divided
  The Los Angeles market is the poster child for the problem of local sports, with area teams split among a glut of six regional sports networks. Three launched in 2012, and another two years later.
Prime Ticket (1985)
Rights: Clippers, Ducks

FS West (1997)
Rights: Angels, Kings
Pac-12 Los Angeles (2012)
Rights: UCLA, USC

TWC SportsNet (2012)
Rights: Lakers, Galaxy, Sparks
TWC SportsNet Deportes (2012)
Rights: Lakers, Galaxy, Sparks (all Spanish-language)
SportsNet LA (2014)
Rights: Dodgers
              Source: SportsBusiness Journal research

This would mark the first time an NBA team has carved out a significant portion of digital rights from a regional sports network deal to develop a team-run OTT service. It also marks a maverick move for Ballmer, the former Microsoft CEO known for his technical prowess and hard-charging business style who vowed to bring a new approach to team ownership.

The Clippers’ current rights deal with the Fox Sports-owned Prime Ticket ends after this season and pays the team an average of around $25 million per year, a sum that is considered below market for an NBA team in the country’s second-largest media market. The team has been negotiating with Fox for several months, but the sides have disagreed about how much the digital rights are worth. That’s the main reason contracts have yet to be signed.

Fox and the Clippers have discussed a short-term deal worth around $50 million per year that would allow Ballmer to pursue his second-screen OTT offering. The short-term nature of the deal would allow the sides to better determine the value of the digital rights while providing the Clippers with a significant rights fee increase.

For Ballmer, the push for an OTT service comes down to control more than money. The owner originally wanted to keep all his media rights in-house and stream his team’s games via an OTT platform. Ultimately, he decided that it was a better financial decision to sell the Clippers’ live TV rights to an RSN while keeping a large swath of digital rights for a planned OTT service.

The Clippers will launch their enhanced service on an authenticated basis, meaning it will be available only to cable and satellite users, sources said. The service is designed to supplement television, not replace it. The Clippers likely would produce the content themselves and would charge for it, though a pricing model could not be determined.

Working with a company called Second Spectrum, the Clippers’ OTT service will provide everything from basic stats such as score, player points and rebounds, to more arcane real-time statistics that can show how fast Chris Paul ran during a fast break or can document Blake Griffin’s shooting percentage when he comes off a screen on the right side of the lane.

Steve Ballmer first wanted to keep all media rights in-house and stream games via OTT.
A similar situation is developing in Washington, D.C., where another tech-focused owner, Wizards and Capitals owner Ted Leonsis, launched Monumental Network as an OTT service to supplement his teams’ games. Leonsis is at the tail end of negotiating a new deal with Comcast SportsNet Mid-Atlantic that will give him an ownership stake in the RSN. Eventually, Monumental Network is expected to add digital rights, not including live games, that would act as a second screen.

The NBA has taken notice of these

The digital carve-out would allow the Clippers to deliver in-game programming.
team-level digital strategies and hired Alex Kaplan from DirecTV as the league’s point person on these matters (see related story).

Sources say the Clippers are likely to renew with Prime Ticket even though the sides have not held meaningful negotiations for several weeks. The Clippers also have had talks with the Los Angeles Dodgers’ channel, SportsNet LA, but those talks are preliminary.

“Irrespective of whether we go back to Fox or to the Dodgers network or what we do independently, the Clippers will absolutely pursue a digital product that is separate and apart from the traditional rights,” said Steve Greenberg, managing director of Allen & Co. which is representing the Clippers in the negotiations. “It is a cutting-edge concept, and Steve Ballmer is a cutting-edge guy, and we are absolutely going down that road. We have a lot of interest from nontraditional media companies. The timing is, come next October, we need to have a TV home and we think we will. We are in the backstretch.”

The team is renegotiating its media deal at a time when sports channels are losing subscribers as a result of cord cutters and cord shavers. The team also is renegotiating in a market that already has five English-language RSNs (FS West, Prime Ticket, SportsNet LA, TWC SportsNet and Pac-12 Los Angeles), though that hasn’t created a buying spree for the Clippers’ rights.

“The Clippers have been great partners and we hope we can continue the relationship,” said Jeff Krolik, president of Fox Sports Regional Networks.